Landlords need more support than ever across a sector where yields, costs and tax benefits are being squeezed. And with product numbers increasing – in terms of volume, variety and in some cases complexity – the value attached to a good, professional advice process continues to rise accordingly.

But do you feel confident in dealing with the slightly off-mainstream borrowers, or those with uncommon properties such as HMOs and multi-unit blocks? It’s a rapidly growing area of investment borrowing which could be as much your ticket to more profitable business next year as theirs.

A growing proportion of landlords are looking to restructure their portfolios through the exploration of more tax efficient methods and focusing their attention on limited company buy-to-let offerings. This is especially apparent in areas where landlords are looking to ensure greater yields – for example HMOs or multi-unit blocks – and there’s growing flexibility in the way lenders are looking at borrowing requirements in these areas.

Focusing on HMOs, we’ve seen heightened landlord demand for such properties in recent times and this is also a trend which was highlighted in the latest Q3 landlord research from Foundation Home Loans in conjunction with BVA BDRC. The data revealed a potential step-change in the type of properties landlords were adding to portfolios and where they were likely to concentrate in the future.

HMOs continued to generate the highest rental yield for landlords at 6.5%, with 20% of landlords now having an HMO property within their portfolio – landlords were said to typically branch out into HMOs after their fifth property, while 10% of landlords now own a multi-unit block of flats.

HMOs are particularly popular in Wales (31% of landlords have at least one) and the East Midlands (26%). To complete this HMO mapping of the UK, the data showed that 25% of landlords in Central London and in the South West incorporated HMOs within their portfolio. The South East (excluding London) saw 23% of landlords own such a property, the East of England 20% and the West Midlands 20%. In the bottom half of the rankings, the North West and Yorks & Humber polled 19%, London (Outer) 17% and the North East came in at 13%.

The types of property typically owned by landlords remained largely unchanged in Q3, with terraced houses continuing to be most common. Portfolio diversity increased in line with size, with 11+ property landlords having an average of 3.3 different property types in their portfolio, compared to the 1.9 held on average by those with 10 or fewer properties. A fifth of landlords were reported to own an HMO property and landlords with 11+ properties were twice as likely to hold an HMO within their portfolio.

With landlords diversifying their portfolios to minimise risk and bolster yields, then its highly likely that HMOs will continue to rise in popularity. So, make sure you are fully aware of all potential HMO options for your clients, and if you are in any doubt then why not speak to the Foundation team to find out more.